Estate Planning When Heirs Lack Money Skills

09/20/2016

It’s a dilemma that many aging parents face: an adult child cannot handle money. How can you leave such a child an inheritance when you are afraid they will squander the money, lose it to unscrupulous friends or spend it on drugs? According to NJ 101.5 in its recent post, “When you don’t trust a child with money,” an estate planning attorney will be able to help you explore the options.

There are some children, regardless of age, who need help managing their finances. By the same token, there are also some children who are good with money who make mistakes upon inheriting a large sum of money all at once.

If you think that a child needs restrictions, it’s always a good idea to look into your options with an experienced estate planning attorney. If this is done to protect the child from himself or herself, there is really nothing unfair about this type of plan. In fact, this action may actually help and not be seen as “unfair” treatment.

If parents have concerns about a child’s ability to handle an inheritance, they can leave their inheritance in trust for the child’s benefit. When creating the trust, a trustee must be named. It probably shouldn’t be another child, which could create unrest in the family. Rather, you might designate a trusted family friend or advisor as trustee, or you could use a financial institution that provides trust services.

The terms of the trust can be customized to the child’s needs and could stipulate that he or she receive a fixed percentage of the assets each year from the trust. This alleviates much of the discretion on the part of the trustee regarding whether or not to make a distribution. Another option is to allow the trustee to decide the amount and timing of distributions.

Speak with an experienced estate planning attorney who can help you determine what kind of trust will work best for your particular situation. Together, you will be able to devise a strategy that provides you with peace of mind and protects your children as well.

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

★★★★★

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.

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